Alberta must bring in more revenue, but new taxes have to be fair

With the price of oil having plummeted, it’s clear the government of Alberta has to increase revenues in the next budget. The position taken by the official opposition Wildrose Party that cuts to expenditures will do the whole job is ludicrous. The government needs to find about $ 6 billion. The notion such a sum can be found by “trimming the fat” is simplistic and just silly. Yes, the government wastes money – and that has to stop – but it doesn’t waste $ 6 billion a year.

Alberta should have moved long ago to put much of our non-renewable resource revenues into the Heritage Savings Trust Fund. Had we done so we could be looking at something like the nearly trillion dollars now in Norway’s oil fund to ease our transition through the present crisis and to a less hydrocarbon intensive way of life. But that would have been then, this is now: with oil at about $ 45 per barrel, the need to move to a different way of funding Alberta government functions is finally we must fervently hope unavoidable.

What to do? First, the government should move to raise taxes on those that have to this point escaped paying their fair share of government operations – corporations and wealthier Albertans. In a decent society decisions on taxation are always be guided by a commitment to social justice. Alberta already has the largest gap between rich and poor in Canada. Changes to our tax structure must not exacerbate that dangerously destabilizing divide.

We need to abandon our flat income tax rate of 10% and return to the progressive income tax system we had until 2001. We should also raise corporate taxes and need as well to get oil and gas companies to pay more for the opportunity to profit, as they have extremely handsomely, from Albertans’ resources. Most importantly, as soon as the dust settles and oil prices stabilize, we need to raise royalties on both oil and gas. We must start to act, as former premier Peter Lougheed urged, as the owners of what are our resources: we need to charge what the royalties market will bear, not what the companies want to pay.

For sure there are opportunities for cuts in government expenditures. Most importantly, the province needs to search out inappropriate government subsidies and remove them, for example, the billions committed to carbon capture and storage. Money has been spent carelessly during the good times and we need to institute a system whereby expenses that are out of line with other similar jurisdictions are carefully reviewed.

But across-the-board cuts as experienced during the Ralph Klein era must be rejected. The salaries paid to public sector workers, for example teachers, should not be cut just because they are higher than those paid in other provinces. The cost of pretty much everything in Alberta is higher than elsewhere in Canada because we have more people – nearly all of them in the oil and gas sector – earning very high amounts. We all face higher costs, teachers and nurses included, even if we do not make oil-patch wages.

If our currently unfair taxation system is corrected and unjustified corporate giveaways are eliminated, many Albertans might be willing to bear new taxes, such as a sales tax.

We should be wary of sales taxes because they are inherently regressive – poor people pay as much for an item part of the price of which is the sales tax as do the very rich. Since Alberta already has a large gap between rich and poor, if a sales tax is instituted here, the change must include rebates which carefully reflect ability to pay.

A carbon tax is desperately needed in Alberta but not to cover ordinary operating expenses and the costs of much needed new infrastructure. Proceeds of a carbon tax should instead be devoted to developing serious energy conservation programs and to nurturing renewable energy industries, such as solar, wind and geothermal and other sustainable businesses and generally to easing our society’s transition away from our overly intensive dependency on hydrocarbons.

There is a place too for using debt in achieving the kind of budget Albertans need.

You have probably heard the expression: “Never waste a crisis.” Along with gobs of money, Albertans have wasted the crises precipitated by previous falls in oil prices. The present one could provide the impetus to finally move us beyond petro-state public financing to the better, more sustainable place we need to be.

We Albertans desperately need this to happen.

A somewhat edited version of this blog was earlier published on the Troy Media website http://www.troymedia.com/2015/01/20/4-steps-to-improving-albertas-finances/

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Comments 8

Well said Janet. I am particularly concerned that Prentice will make public sector workers the “fall guy”. Prentice is very quick to support private sector wages for the executives running the government’s agencies, boards and tribunal , but not so quick to support decent wages for non-executive level public sector employees like nurses, teachers, emergency workers. A hypocritical and cynical politician who needs to be voted out of office.

Very on point Janet! This is why we need you and more Greens to make a breakthrough in the Alberta Legislature. Higher corporate taxes is well needed but we also need to raise the minimum wage. The idea of a “minimum wage” is just silly. People shouldn’t have to scrape by. We need a living wage. Something people can afford to actually live on.

We need more Greens locally, provincially and federally. I hope you can make a difference in our next election, keep up the great work Janet!

100 % agreed on the need for a minimum living wage. Greens have policy calling for a guaranteed annual income but we need to add policy explicitly calling for minimum living wage. Thanks for your contribution.

You write: “We should be wary of sales taxes because they are inherently regressive – poor people pay as much for an item part of the price of which is the sales tax as do the very rich.”
This is true but still needs a little amending: for essentials, the poor do indeed pay as much per item as the rich, yes; but for non-essentials and, more clearly, for luxury items, the poor buy fewer items than the rich do — and in this respect a sales tax is extremely fair.
What you write about rebates is however correct — and I very much agree with the rest of the piece.
The coming recession, or however it will be (mis)named, will be the time to bite the bullet, indeed to bite several bullets — the blind subservience to non-renewables, the kinds of tax Albertans should have, the fact that elsewhere in the world renewable energy is more profitable than the use of what is underground, ….

Great article and generally points I agree with. Carbon Capture and Storage, oil company subsidies, low royalty rates, and abuse of the Heritage Fund are together part of the financing problem.

I am very wary of incurring deficits that aren’t already planned to be paid for. Structural deficits lead to long term debt, and sustainable financing HAS to factor into the picture or else our prosperity as a province isn’t very sustainable at all.

It’s a commonly held belief by almost everyone I know that as households we are expected to balance our budget, but the government is almost never held to this standard. My take is that a better option than financing our future with debt is to responsibly cut public programs/ positions (not wholesale unless they are useless, like CCS) and take in new sources of revenue if necessary. At the very least, we as Albertans (and not creditors) can then dictate where we go in the future.

In the discussion around budgeting, there is no mention of property taxes. The Province takes its slice (ostensibly for education) and insists that municipalities must be funded by property taxes – and then downloads programs to them, making them look like the greedy tax-and-spend organizations that they aren’t.

I would like to see the WHOLE tax regime reviewed, including property taxes and so-called user fees. My hunch is that the fairest result could well be based on a considerably re-vamped progressive income tax system. There need be no sales tax, nor property tax. User fees and royalties should be applied to truly discretionary expenditures making use of the Province’s (the peoples’) resources so that all Albertans get a fair return for the use of their resources (water, coal, oil, gas, bitumen, forests. . .)